<PAGE>
[Pioneer Logo]
Pioneer II
ANNUAL REPORT 9/30/00
<PAGE>
Table of Contents
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter from the Chairman 1
Portfolio Summary 2
Performance Update 3
Portfolio Management Discussion 6
Schedule of Investments 9
Financial Statements 15
Notes to Financial Statements 22
Report of Independent Public Accountants 28
Results of Shareowner Meeting 29
Trustees, Officers and Service Providers 30
The Pioneer Family of Mutual Funds 31
Programs and Services for Pioneer Shareowners 32
Retirement Plans from Pioneer 34
</TABLE>
<PAGE>
Pioneer II
LETTER FROM THE CHAIRMAN 9/30/00
Dear Shareowner,
--------------------------------------------------------------------------------
By the time you read this report, we will all know how the financial markets
responded to this year's election. Market reactions to presidential elections
are often short-lived; after digesting the outcome, investors return to
thinking about the factors that influence their portfolios: the economic
outlook, the impact of higher interest rates and selecting the right
investments.
In addition to squeezing corporate profits, higher interest rates cause
consumers to postpone or reduce nonessential purchases. The cumulative weight
of these individual decisions and today's high energy prices can already be
seen in spotty retail activity and lower sales of new cars and homes. As a
result, the economy will probably back off from its extraordinary recent growth
pace to lower, more sustainable levels.
Now could be a perfect time to straighten up your financial house. Some of the
steps you can take include contributing as much as you can to your company's
retirement programs, deciding whether a Roth or Traditional IRA might be a
better choice in your circumstances, and reassessing your investments in light
of changing markets. Your investment professional is your best guide to making
these important decisions.
An important announcement from Pioneer
I'm very happy to report that, on October 24, 2000, Pioneer Group, Inc. was
acquired by UniCredito Italiano S.p.A. Based in Milan, UniCredito is one of
Italy's largest banking groups, with assets under management of over $150
billion. As part of UniCredito, Pioneer will have access to greater resources
and enjoy expanded global asset management expertise with multi-national
operations and a significant presence in eight countries. Pioneer's tradition
of fundamental investment analysis that has been the hallmark of our success
will continue and be strengthened. We are very pleased to be joining an
organization with the reputation and breadth of UniCredito. Its flourishing
investment management business will be combined with Pioneer's U.S. and
European investment operations to form a truly world class investment asset
management company.
Respectfully,
[signature of John F. Cogan, Jr.]
John F. Cogan, Jr.
Chairman and President
1
<PAGE>
Pioneer II
PORTFOLIO SUMMARY 9/30/00
Portfolio Diversification
--------------------------------------------------------------------------------
(As a percentage of total investment portfolio)
[pie chart]
Sector Distribution
--------------------------------------------------------------------------------
(As a percentage of equity holdings)
[pie chart]
10 Largest Holdings
--------------------------------------------------------------------------------
(As a percentage of equity holdings)
<TABLE>
<S> <C> <C> <C>
1. Ambac Financial Group, 5.98% 6. Washington Mutual, Inc. 2.63%
Inc.
2. Dominion Resources, Inc. 5.17 7. Charter One Financial, Inc. 2.60
3. Koninklijke Philips 4.61 8. Merck & Co., Inc. 2.26
Electronics NV (NY
Shares)
4. Amgen Inc. 4.55 9. Verizon Communications 2.23
5. Intel Corp. 2.89 10. IBM Corp. 2.20
</TABLE>
Fund holdings will vary for other periods.
2
<PAGE>
Pioneer II
PERFORMANCE UPDATE 9/30/00 CLASS A SHARES
Share Prices and Distributions
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 9/30/00 9/30/99
$22.67 $20.16
Income Short-Term Long-Term
Distributions per Share
(9/30/99 -9/30/00) Dividends Capital Gains Capital Gains
$0.197 - $0.514
</TABLE>
Investment Returns
--------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made
in Pioneer II at public offering price, compared to the growth of the Standard
& Poor's 500 Index and the Lipper Growth & Income Funds Index.
<TABLE>
<S> <C> <C>
Average Annual Total Returns
(As of September 30, 2000)
Net Asset Public Offering
Period Value Price*
10 Years 12.93% 12.26%
5 Years 10.12 8.83
1 Year 16.29 9.61
</TABLE>
* Reflects deduction of the maximum 5.75% sales charge at the beginning of the
period and assumes reinvestment of distributions at net asset value.
[mountain chart]
The Standard & Poor's 500 Index is an unmanaged measure of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange
and the over-the-counter market. The Lipper Growth and Income Funds Index
reflects the performance (excluding sales charges) of mutual funds with similar
portfolio characteristics and capitalization. Index returns assume reinvestment
of dividends and, unlike Fund returns, do not reflect any fees, expenses or
sales charges. You cannot invest directly in either Index.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
3
<PAGE>
Pioneer II
PERFORMANCE UPDATE 9/30/00 CLASS B SHARES
Share Prices and Distributions
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 9/30/00 9/30/99
$22.11 $19.74
Distributions per Share Income Short-Term Long-Term
(9/30/99 -9/30/00) Dividends Capital Gains Capital Gains
- - $0.514
</TABLE>
Investment Returns
--------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made
in Pioneer II, compared to the growth of the Standard & Poor's 500 Index and
the Lipper Growth & Income Funds Index.
<TABLE>
<S> <C> <C>
Average Annual Total Returns
(As of September 30, 2000)
If If
Period Held Redeemed*
Life-of-Fund 8.32% 7.96%
(7/1/96)
1 Year 14.81 10.81
</TABLE>
* Reflects deduction of the maximum applicable contingent deferred sales
charge (CDSC) at the end of the period and assumes reinvestment of
distributions. The maximum CDSC of 4% declines over six years.
[mountain chart]
The Standard & Poor's 500 Index is an unmanaged measure of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange
and the over-the-counter market. The Lipper Growth and Income Funds Index
reflects the performance (excluding sales charges) of mutual funds with
similar portfolio characteristics and capitalization. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any fees,
expenses or sales charges. You cannot invest directly in either Index.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than
their original cost.
4
<PAGE>
Pioneer II
PERFORMANCE UPDATE 9/30/00 CLASS C SHARES
Share Prices and Distributions
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Net Asset Value
per Share 9/30/00 9/30/99
$22.16 $19.78
Distributions per Share Income Short-Term Long-Term
(9/30/99 -9/30/00) Dividends Capital Gains Capital Gains
- - $0.514
</TABLE>
Investment Returns
--------------------------------------------------------------------------------
The mountain chart on the right shows the growth of a $10,000 investment made
in Pioneer II, compared to the growth of the Standard & Poor's 500 Index and
the Lipper Growth & Income Funds Index.
<TABLE>
<S> <C> <C>
Average Annual Total Returns
(As of September 30, 2000)
If If
Period Held Redeemed*
Life-of-Fund 8.36% 8.36%
(7/1/96)
1 Year 14.83 14.83
</TABLE>
* Assumes reinvestment of
distributions. The 1% contingent
deferred sales charge (CDSC)
applies to redemptions made within
one year of purchase.
[mountain chart]
The Standard & Poor's 500 Index is an unmanaged measure of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange
and the over-the-counter market. The Lipper Growth and Income Funds Index
reflects the performance (excluding sales charges) of mutual funds with similar
portfolio characteristics and capitalization. Index returns assume reinvestment
of dividends and, unlike Fund returns, do not reflect any fees, expenses or
sales charges. You cannot invest directly in either Index.
Past performance does not guarantee future results. Return and share price
fluctuate, and your shares, when redeemed, may be worth more or less than their
original cost.
5
<PAGE>
Pioneer II
PORTFOLIO MANAGEMENT DISCUSSION 9/30/00
In the following discussion, portfolio manager Richard Dahlberg, whose
investment management experience extends back over 30 years, describes his
investment strategies and their role in the Fund's performance during the
fiscal year that ended on September 30.
Q: Before we talk about your strategies, please recap this year's performance.
A: For the 12 months ended September 30, 2000, the Fund's Class A shares had a
total return at net asset value (NAV) of 16.29%, compared to a return of
13.25% for the Standard & Poor's 500 Index. Class B and C shares also did
better than the Index, with NAV returns of 14.81% and 14.83%, respectively.
This outperformance was especially strong during the most recent three
months, when the S&P 500 lost 0.96%, while the Fund's Class A, B and C shares
all returned 5% or more at NAV.
Meanwhile, the average return of the 475 funds in Lipper's Multi-Cap Value
Category - funds that invest in value stocks of various sizes - was 11.94%
for the 12 month period. (Lipper is an independent firm that tracks mutual
fund performance.)
Q: What were some of the components of these solid results?
A: The Fund's strong performance resulted both from what we owned and what we
avoided. For example, we maintained overweight positions in technology, in
energy and in utilities, all sectors that helped performance for almost the
entire period. At the same time, the Fund had virtually no exposure to the
retail sector, which has been suffering very poor results. And we steered
clear of the dot-com area entirely.
It also helped that investors have been migrating toward value and away
from a strict growth orientation for much of the year, bringing added
support to the value areas of the market.
6
<PAGE>
Pioneer II
Q: Until just recently, technology stocks led the market. How did that play into
your value strategy?
A: Our approach was to concentrate on profitable technology companies whose
products are important to the Internet's infrastructure, and whose potential
to expand earnings wasn't just reflected in their market valuations. Then,
early in 2000 we began cutting back technology holdings when their prices
began to outstrip our sense of their value. By reducing holdings in Oracle,
Texas Instruments, Koninklijke Philips Electronics and others, we locked up
significant gains and avoided some of this year's technology selloff.
Overall, we brought down the Fund's technology exposure from over 28% of the
portfolio to over 21% at September 30.
Q: What else helped or hurt Fund performance?
A: Energy and utility stocks were key performance drivers. After low prices had
discouraged drilling for years, strong economic conditions are now ratcheting
up demand for oil while OPEC is holding firm on production. Resulting tight
supplies have inevitably led to higher prices, giving drillers an incentive
to seek new sources of oil and gas. This works to the benefit of oil service
companies like Halliburton and R&B Falcon.
Environmental considerations now require that virtually all new electrical
plants be fired by gas. But existing gas supplies are inadequate to meet the
growing appetite for power, and prices are rising dramatically, boosting
profits for many utility companies. Dominion Resources is benefiting from
deregulation by buying plants beyond its Mid-Atlantic home and selling power
to the highest bidder in areas where shortages are acute.
Q: How have rising interest rates affected your financial holdings?
A: Financial companies now represent some 19% of the portfolio, about equal with
technology. Stocks of banks, insurers and others have been hurt during this
period of climbing interest rates. Eventually, though, rates are likely to
plateau and come down as the economy slows. That scenario would favor
mortgage companies like Washington Mutual and Charter One Financial. Ambac,
the Fund's largest holding, has firmed up its rate structure, expanded its
product line and tightened underwriting standards.
7
<PAGE>
Pioneer II
PORTFOLIO MANAGEMENT DISCUSSION 9/30/00 (continued)
Q: Which other sectors have had an impact on performance?
A: Results in health care, our third-largest sector, got a boost from biotech
leader Amgen, thanks to new and anticipated drug approvals. Hospital
companies HCA and Wellpoint are benefiting because rising Medicare
reimbursements are expected to alleviate the squeeze between falling revenues
and rising costs.
Our basic material stocks show attractive valuations, but the likelihood
of a slowing economy remains a negative. We were underweight in chemicals,
which helped performance, but our exposure to the paper industry hurt
results.
Our underweight position in telecommunications services also helped
results. Stocks in this sector are down sharply this year, but attractive
valuations and the steady nature of their businesses are now attracting
investors. Fund holdings in this sector include Verizon and SBC
Communications.
Q: Can you give us a forecast for the economy in the upcoming months?
A: It's pretty clear that business is slowing. Consumers appear to have reached
their spending limits, so sales of cars and housing are down and retail
figures are uneven. In the business sector, capital expenditures are less
than capital spending. Industrial output was weaker in the third quarter than
it has been in almost two years.
An economic slowdown often helps value investors like us by giving a wider
range of reasonably priced stocks to choose from. Value stocks have
underperformed growth for some time, but with the reality of the new economy
being rethought, we believe value stocks are poised for a comeback and have
positioned the fund to benefit from that possibility. In addition, we have
steadily upgraded the portfolio in terms of size and financial strength. We
are also emphasizing companies that can respond favorably to the falling
interest rates that may accompany a slowdown in economic growth.
8
<PAGE>
Pioneer II
SCHEDULE OF INVESTMENTS 9/30/00
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
INVESTMENTS IN SECURITIES - 99.3%
PREFERRED STOCKS - 0.6%
355,000 Telecomunicacoes Brasileiras SA (A.D.R.) $ 28,089,375
------------
TOTAL PREFERRED STOCKS
(Cost $32,180,242) $ 28,089,375
------------
COMMON STOCK - 98.7%
Basic Materials - 3.9%
Aluminum - 0.5%
800,000 Alcoa, Inc. $ 20,250,000
------------
Chemicals - 0.6%
1,774,000 Lyondell Petrochemicals Co. $ 20,955,375
1,880,000 Mississippi Chemical Corp.+ 7,520,000
------------
$ 28,475,375
------------
Chemicals (Specialty) - 1.4%
1,700,000 Cytec Industries, Inc.* $ 56,843,750
400,000 Hercules, Inc. 5,650,000
1,169,500 Terra Industries, Inc.* 2,485,188
------------
$ 64,978,938
------------
Containers & Packaging (Paper) - 0.2%
4,300,000 Vitro SA (A.D.R.) $ 11,287,500
------------
Metals Mining - 0.2%
1,200,000 Freeport-McMorRan Copper & Gold, Inc. (Class B)* $ 10,575,000
------------
Paper & Forest Products - 1.0%
2,000,000 Asia Pulp & Paper Ltd. (A.D.R.)* $ 3,500,000
400,000 Bowater Inc. 18,575,000
200,000 Georgia-Pacific Group 4,700,000
1,500,000 Longview Fibre Co. 18,000,000
------------
$ 44,775,000
------------
Total Basic Materials $180,341,813
------------
Capital Goods - 6.4%
Manufacturing (Diversified) - 6.2%
538,900 Amcast Industrial Corp.+ $ 5,085,869
1,588,700 Briggs & Stratton Corp.+ 60,072,719
4,000,000 Donaldson Co., Inc.+ 88,000,000
1,926,000 Dionex Corp.*+ 53,205,750
3,547,600 Trinity Industries, Inc.+ 82,925,150
------------
$289,289,488
------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
Pioneer II
SCHEDULE OF INVESTMENTS 9/30/00 (continued)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Metal Fabricators - 0.2%
806,525 A.M. Castle & Co.+ $ 7,762,803
------------
Total Capital Goods $297,052,291
------------
Communication Services - 3.7%
Cellular/Wireless Telecommunications - 0.1%
301,100 AT&T Wireless Group* $ 6,285,463
------------
Telephone - 3.6%
994,800 SBC Communications, Inc. $ 49,740,000
205,150 Telefonica de Espana (A.D.R.)* 12,193,603
2,125,000 Verizon Communications 102,929,687
------------
$164,863,290
------------
Total Communication Services $171,148,753
------------
Consumer Cyclicals - 5.3%
Auto Parts & Equipment - 0.7%
1,608,419 Delphi Automotive Systems Corp $ 24,327,337
665,000 Simpson Industries, Inc. 8,146,250
------------
$ 32,473,587
------------
Automobiles - 0.9%
634,414 General Motors Corp. $ 41,236,910
------------
Consumer (Jewelry, Novelties & Gifts) - 1.2%
2,247,450 Lancaster Colony Corp.+ $ 55,202,991
------------
Homebuilding - 2.1%
4,145,000 Champion Enterprises, Inc.*+ $ 17,616,250
8,184,000 Clayton Homes, Inc.+ 81,840,000
966,200 Oakwood Homes Corp. 1,449,300
------------
$100,905,550
------------
Retail (Department Stores) - 0.4%
700,000 Federated Department Stores, Inc.* $ 18,287,500
------------
Total Consumer Cyclicals $248,106,538
------------
Consumer Staples - 3.5%
Beverages (Non-Alcoholic) - 0.4%
400,000 PepsiCo, Inc. $ 18,400,000
------------
Foods - 1.9%
2,500,000 IBP, Inc. $ 45,781,250
20,000 Nestle SA (Registered Shares) 41,723,409
------------
$ 87,504,659
------------
</TABLE>
10 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Services (Employment) - 1.2%
2,450,000 Kelly Services Inc. (Non-Voting) $ 57,881,250
------------
Total Consumer Staples $163,785,909
------------
Energy - 10.5%
Oil (Domestic Integrated) - 4.1%
1,100,000 BP Amoco Plc (A.D.R.) $ 58,300,000
3,840,000 Conoco, Inc. 100,320,000
227,256 Conoco Inc. (Class B) 6,121,708
500,000 Shell Transport & Trading Co. (A.D.R.) 24,468,750
------------
$189,210,458
------------
Oil (International Integrated) - 0.7%
600,000 Texaco, Inc. $ 31,500,000
------------
Oil & Gas (Drilling & Equipment) - 4.0%
1,008,100 BJ Services Co.* $ 61,620,113
2,100,000 R&B Falcon Corp.* 58,537,500
300,000 Grant Prideco Inc.* 6,581,250
450,000 Halliburton Co. 22,021,875
310,000 Smith International, Inc.* 25,284,375
300,000 Weatherford International, Inc.* 12,900,000
------------
$186,945,113
------------
Oil & Gas (Production/Exploration) - 1.7%
500,000 Anadarko Petroleum Corp. $ 33,230,000
700,000 Burlington Resources, Inc. 25,768,750
1,000,000 Suncor Energy, Inc. 22,125,000
------------
$ 81,123,750
------------
Total Energy $488,779,321
------------
Financials - 18.9%
Banks (Major Regional) - 1.9%
800,000 Banc One Corp. $ 30,900,000
913,714 Banco Satander SA (A.D.R.) 9,993,747
1,200,000 FleetBoston Financial Corp. 46,800,000
------------
$ 87,693,747
------------
Banks (Money Center) - 2.2%
2,175,000 The Chase Manhattan Corp. $100,457,812
------------
Banks (Regional) - 0.6%
1,242,100 North Fork Bancorporation, Inc $ 26,860,413
------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 11
<PAGE>
Pioneer II
SCHEDULE OF INVESTMENTS 9/30/00 (continued)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Consumer Finance - 1.1%
1,385,000 Countrywide Credit Industries, Inc. $ 52,283,750
------------
Financial (Diversified) - 5.9%
3,760,300 Ambac Financial Group, Inc.+ $275,441,975
------------
Insurance (Life/Health) - 0.4%
2,600,389 Conseco, Inc. $ 19,827,966
------------
Insurance (Multi-Line) - 0.4%
400,000 Nationwide Financial Services, Inc. $ 14,950,000
------------
Insurance (Property/Casualty) - 1.2%
1,550,000 Allstate Corp. $ 53,862,500
------------
Savings & Loan Companies - 5.2%
4,924,696 Charter One Financial, Inc. $120,039,471
3,050,000 Washington Mutual, Inc. 121,428,125
------------
$241,467,596
------------
Total Financials $872,845,759
------------
Healthcare - 13.9%
Biotechnology - 5.1%
3,000,000 Amgen, Inc.* $209,484,375
451,843 Pharmacia Corp. 27,195,301
------------
$236,679,676
------------
Healthcare (Diversified) - 3.2%
1,250,000 American Home Products Corp. $ 70,703,125
1,000,000 HCA - The Healthcare Company 37,125,000
425,600 Wellpoint Health Networks Inc.* 40,857,600
------------
$148,685,725
------------
Healthcare (Drugs Generic) - 0.8%
835,000 Dura Pharmaceuticals, Inc.* $ 29,538,125
300,000 ICN Pharmaceuticals, Inc. 9,975,000
------------
$ 39,513,125
------------
Healthcare (Drugs/Major Pharmaceuticals) - 4.8%
1,112,600 AstraZeneca Plc $ 58,448,247
450,000 Eli Lilly & Co. 36,506,250
1,400,000 Merck & Co., Inc. 104,212,500
600,000 Novartis AG (A.D.R.) 23,212,500
------------
$222,379,497
------------
Total Healthcare $647,258,023
------------
</TABLE>
12 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Technology - 21.3%
Communications Equipment - 1.1%
800,000 Alcatel SA (A.D.R.) $ 50,300,000
------------
Computer (Hardware) - 3.1%
1,400,000 Compaq Computer Corp. $ 38,612,000
900,000 IBM Corp. 101,250,000
100,000 NCR Corp.* 3,781,250
------------
$143,643,250
------------
Computer (Peripherals) - 0.3%
1,000,000 Storage Technology Corp.* $ 13,562,500
------------
Computers (Software & Services) - 1.5%
900,000 Oracle Corp.* $ 70,875,000
------------
Electrical Equipment - 4.7%
4,994,549 Koninklijke Philips Electronics NV (NY Shares) $212,268,333
------------
Electronics (Component Distributors) - 2.0%
2,700,000 Arrow Electronics, Inc.* $ 91,968,750
------------
Electronics (Defense) - 1.9%
1,920,747 General Motors Corp. (Class H) $ 71,413,373
632,200 Raytheon Co. (Class B) 17,978,187
------------
$ 89,391,560
------------
Electronics (Instrumentation) - 0.1%
788,200 MTS Systems Corp. $ 5,517,400
------------
Equipment (Semiconductor) - 5.9%
1,256,383 Applied Materials, Inc.* $ 74,519,217
3,200,000 Intel Corp. 133,000,000
460,000 Helix Technology Corp. 13,742,500
1,100,000 Texas Instruments, Inc. 51,906,250
------------
$273,167,967
------------
Photography/Imaging - 0.7%
800,000 Eastman Kodak Co. $ 32,700,000
------------
Total Technology $983,394,760
------------
Transportation - 2.3%
Airlines - 0.5%
1,000,000 Southwest Airlines Co. $ 24,250,000
------------
Railroad - 1.8%
1,180,000 Canadian National Railway Co. $ 34,588,750
1,300,000 Union Pacific Corp. 50,537,500
------------
$ 85,126,250
------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 13
<PAGE>
Pioneer II
SCHEDULE OF INVESTMENTS 9/30/00 (continued)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Total Transportation $ 109,376,250
--------------
Utilities - 9.0%
Electric Companies - 6.4%
4,107,567 Dominion Resources, Inc. $ 238,495,609
2,200,000 Edison International 42,487,500
409,063 Hawaiian Electric Industries, Inc. 14,266,072
--------------
$ 295,249,181
--------------
Natural Gas - 2.6%
2,073,000 Kinder Morgan Energy Partners, L.P. $ 98,208,371
600,000 Williams Companies, Inc. 25,350,000
--------------
$ 123,558,371
--------------
Total Utilities $ 418,807,552
--------------
TOTAL COMMON STOCK
(Cost $3,167,002,544) $4,580,896,969
--------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $3,199,182,786) $4,608,986,344
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C>
TEMPORARY CASH INVESTMENTS - 0.7%
$33,173,000 American Express Corp., 6.69%, 10/2/00 $ 33,173,000
--------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $33,173,000) $ 33,173,000
--------------
TOTAL INVESTMENTS IN SECURITIES AND
TEMPORARY CASH INVESTMENTS - 100%
(Cost $3,232,355,786) (a) $4,642,159,344
--------------
</TABLE>
* Non-income producing security.
+ Investment held by the fund representing 5% or more of the outstanding voting
stock of such company.
(a) At September 30, 2000, the net unrealized gain on investments based on cost
for federal income tax purposes of $3,233,978,874 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized gain for all investments in which
there is an excess of value over cost $1,842,167,582
Aggregate gross unrealized loss for all investments in which
there is an excess of cost over value (433,987,112)
--------------
Net unrealized gain $1,408,180,470
--------------
</TABLE>
Purchases and sales of securities (excluding temporary cash investments) for
the year ended September 30, 2000, aggregated $128,728,696 and $1,325,857,380
respectively.
14 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
BALANCE SHEET 9/30/00
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (including temporary cash
investments of $33,173,000) (cost $3,232,355,786) $4,642,159,344
Cash 620
Receivables -
Fund shares sold 1,164,092
Dividends, interest and foreign taxes withheld 4,270,618
Other 75,868
--------------
Total assets $4,647,670,542
--------------
LIABILITIES:
Payables -
Fund shares repurchased $ 4,636,896
Due to affiliates 3,538,481
Accrued expenses 535,638
--------------
Total liabilities $ 8,711,015
--------------
NET ASSETS:
Paid-in capital $2,912,350,020
Accumulated undistributed net investment income 22,508,338
Accumulated undistributed net realized gain on investments and
foreign currency transactions 294,310,502
Net unrealized gain on investments 1,409,803,558
Net unrealized loss on assets and liabilities denominated in
foreign currencies (12,891)
--------------
Total net assets $4,638,959,527
--------------
NET ASSET VALUE PER SHARE:
(Unlimited number of shares authorized)
Class A (based on $4,614,739,110/203,549,718 shares) $ 22.67
--------------
Class B (based on $20,632,497/933,224 shares) $ 22.11
--------------
Class C (based on $3,587,920/161,938 shares) $ 22.16
--------------
MAXIMUM OFFERING PRICE:
Class A $ 24.05
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 15
<PAGE>
Pioneer II
STATEMENT OF OPERATIONS
For the Year Ended 9/30/00
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $1,097,405) $ 86,226,202
Interest 1,074,733
------------
Total investment income $ 87,300,935
------------
EXPENSES:
Management fees
Basic fee $ 29,592,905
Performance adjustment (4,990,835)
Transfer agent fees
Class A 9,986,775
Class B 157,131
Class C 28,169
Distribution fees
Class A 11,213,892
Class B 222,196
Class C 42,259
Administrative fees 616,761
Custodian fees 278,764
Professional fees 166,436
Printing 228,145
Miscellaneous expenses 71,296
Fees and expenses of nonaffiliated trustees 68,880
------------
Total expenses $ 47,682,774
Less fees paid indirectly (1,254,404)
------------
Net expenses $ 46,428,370
------------
Net investment income $ 40,872,565
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from:
Investments (including $15,561,348 from affiliated
companies) $298,611,575
Other assets and liabilities denominated in foreign
currencies 10,718 $298,622,293
------------ ------------
Change in net unrealized gain (loss) from:
Investments $407,463,943
Other assets and liabilities denominated in foreign
currencies (12,520) $407,451,423
------------ ------------
Net gain on investments and foreign currency
transactions $706,073,716
------------
Net increase in net assets resulting from operations $746,946,281
------------
</TABLE>
16 The accompanying notes are an integral part of these financial statements.
<PAGE>
Pioneer II
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended 9/30/00 and 9/30/99
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/00 9/30/99
<S> <C> <C>
FROM OPERATION
Net investment income $ 40,872,565 $ 54,498,188
Net realized gain on investments and foreign currency
transactions 298,622,293 128,989,779
Change in net unrealized gain on investments
and foreign currency transactions 407,451,423 500,572,638
--------------- --------------
Net increase in net assets resulting
from operations $ 746,946,281 $ 684,060,605
--------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ($0.20 and $0.19 per share, respectively) $ (45,604,763) $ (51,921,429)
Net realized gain:
Class A ($0.51 and $0.15 per share, respectively) (127,730,551) (44,442,516)
Class B ($0.51 and $0.15 per share, respectively) (569,430) (229,790)
Class C ($0.51 and $0.15 per share, respectively) (103,341) (45,439)
--------------- --------------
Total distributions to shareholders $ (174,008,085) $ (96,639,174)
--------------- --------------
FROM FUND SHARE TRANSACTION
Net proceeds from sale of shares $ 371,539,921 $ 549,021,003
Reinvestment of distributions 161,834,561 89,470,501
Cost of shares repurchased (1,619,222,956) (1,594,983,583)
--------------- --------------
Net decrease in net assets resulting
from fund share transactions $(1,085,848,474) $ (956,492,079)
--------------- --------------
Net decrease in net assets $ (512,910,278) $ (369,070,648)
NET ASSETS:
Beginning of year 5,151,869,805 5,520,940,453
--------------- --------------
End of year (including accumulated undistributed net
investment income of $22,508,338 and $28,087,934,
respectively) $ 4,638,959,527 $5,151,869,805
--------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements. 17
<PAGE>
Pioneer II
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS A '00 Shares '00 Amount '99 Shares '99 Amount
Shares sold 16,716,130 $ 354,684,759 25,634,232 $ 527,769,739
Reinvestment of distributions 7,700,509 161,195,366 4,390,605 89,211,509
Less shares repurchased (75,119,900) (1,597,282,961) (75,774,124) (1,572,599,850)
----------- ---------------- ----------- ---------------
Net decrease (50,703,261) $ (1,081,402,836) (45,749,287) $ (955,618,602)
----------- ---------------- ----------- ---------------
CLASS B
Shares sold 637,526 $ 13,615,524 796,132 $ 16,027,099
Reinvestment of distributions 26,731 547,988 11,167 219,995
Less shares repurchased (844,243) (17,737,732) (866,761) (17,501,553)
----------- ---------------- ----------- ---------------
Net decrease (179,986) $ (3,574,220) (59,462) $ (1,254,459)
----------- ---------------- ----------- ---------------
CLASS C
Shares sold 150,973 $ 3,239,638 259,176 $ 5,224,165
Reinvestment of distributions 4,438 91,207 1,976 38,997
Less shares repurchased (197,710) (4,202,263) (244,298) (4,882,180)
----------- ---------------- ----------- ---------------
Net increase (decrease) (42,299) $ (871,418) 16,854 $ 380,982
----------- ---------------- ----------- ---------------
</TABLE>
18 The accompanying notes are an integral part of these financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS 9/30/00
Pioneer II
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/00 9/30/99
<S> <C> <C>
CLASS A
Net asset value, beginning of year $ 20.16 $ 18.32
--------- ---------
Increase (decrease) from investment operations:
Net investment income $ 0.20 $ 0.21
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 3.02 1.97
--------- ---------
Net increase (decrease) from investment operations $ 3.22 $ 2.18
Distributions to shareholders:
Net investment income (0.20) (0.19)
Net realized gain (0.51) (0.15)
---------- ----------
Net increase (decrease) in net asset value $ 2.51 $ 1.84
---------- ----------
Net asset value, end of year $ 22.67 $ 20.16
---------- ----------
Total return* 16.29% 11.86%
Ratio of net expenses to average net assets+ 0.96% 0.96%
Ratio of net investment income to average net assets+ 0.81% 0.93%
Portfolio turnover rate 3% 12%
Net assets, end of year (in thousands) $4,614,739 $5,125,858
Ratios assuming reduction for fees paid indirectly:
Net expenses 0.94% 0.95%
Net investment income 0.83% 0.94%
FINANCIAL HIGHLIGHTS 9/30/00
Pioneer II
<CAPTION>
Year Ended Year Ended Year Ended
9/30/98 9/30/97 9/30/96
<S> <C> <C> <C>
CLASS A
Net asset value, beginning of year $ 27.85 $ 20.94 $ 20.66
--------- --------- ---------
Increase (decrease) from investment operations:
Net investment income $ 0.17 $ 0.16 $ 0.23
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (6.20) 8.83 2.10
--------- --------- ---------
Net increase (decrease) from investment operations $ (6.03) $ 8.99 $ 2.33
Distributions to shareholders:
Net investment income (0.16) (0.15) (0.32)
Net realized gain (3.34) (1.93) (1.73)
--------- ---------- ----------
Net increase (decrease) in net asset value $ (9.53) $ 6.91 $ 0.28
--------- ---------- ----------
Net asset value, end of year $ 18.32 $ 27.85 $ 20.94
--------- ---------- ----------
Total return* (23.97)% 45.95% 12.18%
Ratio of net expenses to average net assets+ 0.90% 0.96% 0.92%
Ratio of net investment income to average net assets+ 0.74% 0.68% 1.13%
Portfolio turnover rate 50% 47% 66%
Net assets, end of year (in thousands) $5,496,480 $7,534,010 $5,431,797
Ratios assuming reduction for fees paid indirectly:
Net expenses 0.90% 0.95% 0.90%
Net investment income 0.74% 0.69% 1.15%
</TABLE>
* Assumes initial investment at net asset value at the beginning of each year,
reinvestment of all distributions, the complete redemption of the investment
at net asset value at the end of each year, and no sales charges. Total
return would be reduced if sales charges were taken into account.
+ Ratios assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Pioneer II
FINANCIAL HIGHLIGHTS 9/30/00
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended 7/1/96 to
9/30/00 9/30/99 9/30/98(a) 9/30/97(a) 9/30/96
<S> <C> <C> <C> <C> <C>
CLASS B
Net asset value, beginning of period $ 19.74 $ 17.98 $ 27.52 $ 20.89 $ 20.55
------- ------- -------- ------- -------
Increase (decrease) from investment operations:
Net investment loss $ (0.14) $ (0.04) $ (0.07) $ (0.07) $ (0.01)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 3.02 1.95 (6.11) 8.76 0.35
------- ------- -------- ------- --------
Net increase (decrease) from investment operations $ 2.88 $ 1.91 $ (6.18) $ 8.69 $ 0.34
Distributions to shareholders:
Net investment income -- -- (0.02) (0.13) --
Net realized gain (0.51) (0.15) (3.34) (1.93) --
------- ------- -------- ------- --------
Net increase (decrease) in net asset value $ 2.37 $ 1.76 $ (9.54) $ 6.63 $ 0.34
------- ------- -------- ------- --------
Net asset value, end of period $ 22.11 $ 19.74 $ 17.98 $ 27.52 $ 20.89
------- ------- -------- ------- --------
Total return* 14.81% 10.62% (24.76)% 44.58% 1.65%
Ratio of net expenses to average net assets+ 2.23% 2.06% 1.96% 1.94% 2.03%**
Ratio of net investment loss to average net assets+ (0.48)% (0.18)% (0.31)% (0.32)% (0.25)%**
Portfolio turnover rate 3% 12% 50% 47% 66%
Net assets, end of period (in thousands) $20,632 $21,972 $ 21,084 $15,311 $ 864
Ratios assuming reduction for fees paid indirectly:
Net expenses 2.21% 2.04% 1.96% 1.90% 2.02%**
Net investment loss (0.46)% (0.16)% (0.31)% (0.28)% (0.24)%**
</TABLE>
(a) The per share data presented above is based upon the average shares
outstanding for the period presented.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratios assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Pioneer II
FINANCIAL HIGHLIGHTS 9/30/00
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended 7/1/96 to
9/30/00 9/30/99 9/30/98(a) 9/30/97(a) 9/30/96
<S> <C> <C> <C> <C> <C>
CLASS C
Net asset value, beginning of period $ 19.78 $ 18.02 $ 27.55 $ 20.88 $ 20.55
------- ------- -------- ------- -------
Increase (decrease) from investment operations:
Net investment loss $ (0.15) $ (0.04) $ (0.06) $ (0.08) $ (0.01)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 3.04 1.95 (6.07) 8.77 0.34
------- ------- -------- ------- --------
Net increase (decrease) from investment operations $ 2.89 $ 1.91 $ (6.13) $ 8.69 $ 0.33
Distributions to shareholders:
Net investment income -- -- (0.06) (0.09) --
Net realized gain (0.51) (0.15) (3.34) (1.93) --
------- ------- -------- ------- --------
Net increase (decrease) in net asset value $ 2.38 $ 1.76 $ (9.53) $ 6.67 $ 0.33
------- ------- -------- ------- --------
Net asset value, end of period $ 22.16 $ 19.78 $ 18.02 $ 27.55 $ 20.88
------- ------- -------- ------- --------
Total return* 14.83% 10.60% (24.56)% 44.51% 1.61%
Ratio of net expenses to average net assets+ 2.19% 2.08% 1.93% 1.99% 2.02%**
Ratio of net investment loss to average net assets+ (0.43)% (0.22)% (0.28)% (0.39)% (0.15)%**
Portfolio turnover rate 3% 12% 50% 47% 66%
Net assets, end of period (in thousands) $ 3,588 $ 4,039 $ 3,377 $ 2,267 $ 214
Ratios assuming reduction for fees paid indirectly:
Net expenses 2.16% 2.06% 1.93% 1.95% 2.01%**
Net investment loss (0.40)% (0.20)% (0.28)% (0.35)% (0.14)%**
</TABLE>
(a) The per share data presented above is based upon the average shares
outstanding for the period presented.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratios assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Pioneer II
NOTES TO FINANCIAL STATEMENTS 9/30/00
1. Organization and Significant Accounting Policies
Pioneer II (the Fund) is a Delaware business trust registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. After shareholder and regulatory approval, UniCredito Italiano S.p.A.
completed its acquisition of The Pioneer Group, Inc. (PGI) on October 24, 2000.
The investment objectives of the Fund are reasonable income and growth of
capital.
The Fund offers three classes of shares - Class A, Class B and Class C shares.
Shares of Class A, Class B and Class C each represent an interest in the same
portfolio of investments of the Fund and have equal rights to voting,
redemptions, dividends and liquidation, except that each class of shares can
bear different transfer agent and distribution fees and have exclusive voting
rights with respect to the distribution plans that have been adopted by Class
A, Class B and Class C shareholders, respectively.
The Fund's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States that require the
management of the Fund to, among other things, make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund, which are in
conformity with those generally accepted in the investment company industry:
A. Security Valuation
Security transactions are recorded as of trade date. The net asset value is
computed once daily, on each day the New York Stock Exchange is open, as of
the close of regular trading on the Exchange. In computing the net asset
value, securities are valued at the last sale price on the principal exchange
where they are traded. Securities that have not traded on the date of
valuation, or securities for which sale prices are not generally reported,
are valued at the mean between the last bid and asked prices. Securities for
which market quotations are not readily available are valued at their fair
values as determined by, or under the direction of, the Board of Trustees.
Trading in foreign securities is substantially completed each day at various
times prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Dividend income is recorded on the ex-dividend
date, except that
22
<PAGE>
Pioneer II
certain dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Fund is informed of the ex-dividend data
in the exercise of reasonable diligence. Interest income is recorded on the
accrual basis, net of unrecoverable foreign taxes withheld at the applicable
country rates. Temporary cash investments are valued at amortized cost.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes.
B. Foreign Currency Translation
The books and records of the Fund are maintained in U.S. dollars. Amounts
denominated in foreign currencies are translated into U.S. dollars using
current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
among other things, the net realized gains and losses on foreign currency
contracts, disposition of foreign currencies and the difference between the
amount of income accrued and the U.S. dollar actually received. Further, the
effects of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
C. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareholders. Therefore, no federal income tax provision is required.
The characterization of distributions to shareholders for financial reporting
purposes is determined in accordance with federal income tax rules.
Therefore, the source of the Fund's distributions may be shown in the
accompanying financial statements as either from or in excess of net
investment income or net realized gain on investment transactions, or from
paid-in capital, depending on the type of book/tax differences that may
exist.
At September 30, 2000 the Fund has reclassified $847,396 and $2 from
accumulated undistributed net investment income to accumulated
23
<PAGE>
Pioneer II
NOTES TO FINANCIAL STATEMENTS 9/30/00 (continued)
undistributed net realized gain on investments and foreign currency
transactions and Paid in Capital, respectively. This reclassification has no
impact on the net asset value of the Fund and is designed to present the
Fund's capital accounts on a tax basis.
The Fund has designated $283,386,163 as a capital gain dividend for purposes
of the dividend paid deduction.
D. Forward Foreign Currency Contracts
The Fund enters into forward foreign currency contracts (contracts) for the
purchase or sale of a specific foreign currency at a fixed price on a future
date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the Fund's
financial statements. The Fund records realized gains and losses at the time
a portfolio hedge is offset by entry into a closing transaction or
extinguished by delivery of the currency. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the
terms of the contract and from unanticipated movements in the value of
foreign currencies relative to the U.S. dollar. As of September 30, 2000, the
Fund had no outstanding settlement or portfolio hedges.
E. Fund Shares
The Fund records sales and repurchases of its shares as of trade date.
Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for the Fund
and an indirect subsidiary of The Pioneer Group, Inc. (PGI), earned $638,904
in underwriting commissions on the sale of fund shares during the year ended
September 30, 2000.
F. Class Allocations
Distribution fees are calculated based on the average daily net asset value
attributable to Class A, Class B and Class C shares of the Fund,
respectively. Shareholders of each class share all expenses and fees paid to
the transfer agent, Pioneering Services Corporation (PSC), for their
services, which are allocated based on the number of accounts in each class
and the ratable allocation of related out-of-pocket expense (see Note 3).
Income, common expenses and realized and unrealized gains and losses are
calculated at the Fund level and allocated daily to
24
<PAGE>
Pioneer II
each class of shares based on the respective percentage of adjusted net
assets at the beginning of the day.
Distributions to shareholders are recorded as of the ex-dividend date.
Distributions paid by the Fund with respect to each class of shares are
calculated in the same manner, at the same time, and in the same amount,
except that Class A, Class B and Class C shares can bear different transfer
agent and distribution fees.
2. Management Agreement
Pioneer Investment Management, Inc. (PIM), manages the Fund's portfolio and is
a wholly owned subsidiary of PGI. PIM receives a basic fee that is calculated
at the annual rate of 0.60% of the Fund's average daily net assets. The basic
fee is subject to a performance adjustment up to a maximum of +/- 0.10% based on
the Fund's investment performance as compared with the Lipper Growth & Income
Funds Index. The performance comparison is made for a rolling 36-month period.
For the year ended September 30, 2000, the aggregate performance adjustment
resulted in a reduction to the basic fee of $4,990,835. For the year ended
September 30, 2000, the net management fee was equivalent to 0.50% of average
net assets.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Fund. At September 30, 2000, $1,902,540 was payable
to PIM related to management fees, administrative fees and certain other
services.
3. Transfer Agent
PSC, a wholly owned subsidiary of PGI, provides substantially all transfer
agent and shareholder services to the Fund at negotiated rates. Included in due
to affiliates is $693,398 in transfer agent fees payable to PSC at September
30, 2000.
4. Distribution Plans
The Fund adopted a Plan of Distribution for each class of shares (Class A Plan,
Class B Plan and Class C Plan) in accordance with Rule 12b-1 of the Investment
Company Act of 1940. Pursuant to the Class A Plan, the Fund pays PFD a service
fee of up to 0.25% of the Fund's average daily net assets attributable to Class
A shares in reimbursement of its actual expenditures to finance activities
primarily intended to result in the sale of Class A shares. On qualifying
investments made prior to August 19, 1991,
25
<PAGE>
Pioneer II
NOTES TO FINANCIAL STATEMENTS 9/30/00 (continued)
the Class A Plan provides for reimbursement of such expenditures in an amount
not to exceed 0.15%. Pursuant to the Class B Plan and the Class C Plan, the
Fund pays PFD 1.00% of the average daily net assets attributable to each class
of shares. The fee consists of a 0.25% service fee and a 0.75% distribution fee
paid as compensation for personal services and/or account maintenance services
or distribution services with regard to Class B and Class C shares. Included in
due to affiliates is $942,543 in distribution fees payable to PFD at September
30, 2000.
In addition, redemptions of each class of shares may be subject to a contingent
deferred sales charge (CDSC). A CDSC of 1.00% may be imposed on redemptions of
certain net asset value purchases of Class A shares within one year of
purchase. Class B shares that are redeemed within six years of purchase are
subject to a CDSC at declining rates beginning at 4.0%, based on the lower of
cost or market value of shares being redeemed. Redemptions of Class C shares
within one year of purchase are subject to a CDSC of 1.00%. Proceeds from the
CDSCs are paid to PFD. For the year ended September 30, 2000, CDSCs in the
amount of $179,175 were paid to PFD.
5. Expense Offsets
The Fund has entered into certain directed brokerage and expense offset
arrangements resulting in a reduction in the Fund's total expenses. For the
year ended September 30, 2000, the Fund's expenses were reduced by $1,254,404
under such arrangements.
6. Line of Credit
The Fund, along with certain other Funds in the Pioneer Family of Funds (the
Funds), collectively participate in a $50 million committed, unsecured
revolving line of credit facility. Borrowings are used solely for temporary or
emergency purposes. The Fund may borrow up to the lesser of $50 million or the
limits set by its prospectus for borrowings. Interest on collective borrowings
of up to $25 million is payable at the Federal Funds Rate plus 3/8% on an
annualized basis, or at the Federal Funds Rate plus 1/2% if the borrowing
exceeds $25 million at any one time. The Funds pay an annual commitment fee for
this facility. The commitment fee is allocated among such Funds based on their
respective borrowing limits.
The average daily amount of borrowings outstanding during the year ended
September 30, 2000 was $191,809. The average daily shares outstanding during
the period were 229,702,166 resulting in an average borrowing of less than one
cent per share. The related weighted average annualized
26
<PAGE>
Pioneer II
interest rate for the period was 5.99%, and the total interest expense on such
borrowings was $18,316.
7. Affiliated Companies
The Fund's investments in certain companies exceed 5% of the outstanding voting
stock. Such companies are deemed affiliates of the Fund for financial reporting
purposes. The following summarizes transactions with affiliates of the Fund as
of September 30, 2000:
<TABLE>
<CAPTION>
Affiliates Purchases Sales Income Value
------------------------------- ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
A.M. Castle & Co. $ - $ 1,102,977 $ 691,178 $ 7,762,803
Ambac Financial Group, Inc. - 29,888,047 1,780,635 275,441,975
Amcast Industrial Corp. - - 301,784 5,085,869
Briggs & Stratton Corp. - 2,204,206 1,982,827 60,072,719
Champion Enterprises, Inc. - - - 17,616,250
Clayton Homes, Inc. - - 523,766 81,840,000
Dionex Corp. - 8,581,834 - 53,205,750
Donaldson Co., Inc. - 19,353,313 1,292,550 88,000,000
Lancaster Colony Corp. - 25,947,811 1,646,368 55,202,991
Mississippi Chemical Corp. - 1,406,136 249,600 7,520,000
Trinity Industries, Inc. - 8,824,176 2,734,272 82,925,150
----- ----------- ----------- ------------
$ - $97,308,500 $11,202,980 $734,673,507
----- ----------- ----------- ------------
</TABLE>
27
<PAGE>
Pioneer II
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareowners and the Board of Trustees of Pioneer II:
We have audited the accompanying balance sheet, including the schedule of
investments, of Pioneer II as of September 30, 2000, and the related statement
of operations, the statements of changes in net assets, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of September 30, 2000 by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer II as of September 30, 2000, the results of its operations, the changes
in its net assets, and the financial highlights for the periods presented, in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 3, 2000
28
<PAGE>
Pioneer II
RESULTS OF SHAREOWNER MEETING
On September 11, 2000, Pioneer II held a special meeting of shareowners to
approve a new management contract between the Fund and Pioneer Investment
Management, Inc. ("Pioneer"), the Fund's investment adviser. The new contract
will take effect only if the proposed acquisition of The Pioneer Group, Inc.,
the parent of Pioneer, by UniCredito Italiano S.p.A. is consummated.
Shareowners also voted to elect trustees. Both proposals passed by shareowner
vote. Here are the detailed results of the votes.
Proposal 1 -- To approve a new management contract.
<TABLE>
<CAPTION>
Affirmative Against Abstain
<S> <C> <C>
133,812,532.962 6,539,807.012 5,511,681.939
</TABLE>
Proposal 2 -- To elect trustees.
<TABLE>
<CAPTION>
Nominee Affirmative Withheld
<S> <C> <C>
M.K. Bush 140,722,440.181 5,141,581.732
J.F. Cogan, Jr. 140,625,043.156 5,238,978.757
Dr. R. H. Egdahl 140,555,125.090 5,308,896.823
M.B.W. Graham 140,880,712.327 4,983,309.586
M.A. Piret 140,894,484.079 4,969,537.834
D.D. Tripple 140,949,523.409 4,914,498.504
S.K. West 140,803,648.880 5,060,373.033
J. Winthrop 141,019,818.645 4,844,203.268
</TABLE>
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<PAGE>
Pioneer II
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
<TABLE>
<S> <C>
Trustees Officers
John F. Cogan, Jr. John F. Cogan, Jr., Chairman and
Mary K. Bush President
Richard H. Egdahl, M.D. David D. Tripple, Executive Vice
President
Margaret B.W. Graham Richard E. Dahlberg, Vice President
Marguerite A. Piret Eric W. Reckard, Treasurer
David D. Tripple Joseph P. Barri, Secretary
Stephen K. West
John Winthrop
</TABLE>
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Public Accountants
Arthur Andersen LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Hale and Dorr LLP
Shareowner Services and Transfer Agent
Pioneering Services Corporation
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<PAGE>
THE PIONEER FAMILY OF MUTUAL FUNDS
For information about any Pioneer mutual fund, please contact your investment
professional, or call Pioneer at 1-800-225-6292. Ask for a free fund
information kit, which includes a fund prospectus. Please read the prospectus
carefully before you invest or send money.
Growth Funds Income Funds
United States Taxable
Pioneer Growth Shares Pioneer America Income Trust
Pioneer Micro-Cap Fund Pioneer Bond Fund
Pioneer Mid-Cap Fund Pioneer High Yield Fund
Pioneer Mid-Cap Value Fund Pioneer Limited Maturity Bond Fund
Pioneer Science & Technology Fund Pioneer Strategic Income Fund
Pioneer Small Company Fund
Pioneer Tax-Managed Fund Tax-Free
Pioneer Tax-Free Income Fund
International/Global
Pioneer Emerging Markets Fund Money Market Fund
Pioneer Europe Fund Pioneer Cash Reserves Fund*
Pioneer Indo-Asia Fund
Pioneer International Growth Fund
Pioneer World Equity Fund
Growth and Income Funds
Pioneer Fund
Pioneer II
Pioneer Balanced Fund
Pioneer Equity-Income Fund
Pioneer Real Estate Shares
*An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks
to preserve the value of your investment at $1 per share, it is possible to
lose money by investing in the Fund.
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<PAGE>
PROGRAMS AND SERVICES FOR PIONEER SHAREOWNERS
Your investment professional can give you additional information on Pioneer's
programs and services. If you want to order literature on any of the following
items directly, simply call Pioneer at 1-800-225-6292.
FactFone(SM)
Our automated account information service, available to you 24 hours a day,
seven days a week. FactFone gives you a quick and easy way to check fund share
prices, yields, dividends and distributions, as well as information about your
own account. Simply call 1-800-225-4321. For specific account
information, have your 13-digit account number and four-digit personal
identification number at hand.
90-Day Reinstatement Privilege (for Class A Shares)
Enables you to reinvest all or a portion of the money you redeem from your
Pioneer account - without paying a sales charge - within 90 days of your
redemption. You have the choice of investing in any Pioneer fund, as long as
you meet its minimum investment requirement.
Investomatic Plan
An easy and convenient way for you to invest on a regular basis. All you need
to do is authorize a set amount of money to be moved out of your bank account
into the Pioneer fund of your choice. Investomatic also allows you to change
the dollar amount, frequency and investment date right over the phone. By
putting aside affordable amounts of money regularly, you can build a long-term
investment - without sacrificing your current standard of living.
Payroll Investment Program (PIP)
Lets you invest in a Pioneer fund directly through your paycheck. All that's
involved is for your employer to fill out an authorization form allowing
Pioneer to deduct from participating employees' paychecks. You specify the
dollar amount you want to invest into the Pioneer fund(s) of your choice.
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Automatic Exchange Program
A simple way to move money from one Pioneer fund to another over a period of
time. Just invest a lump sum in one fund, and select the other Pioneer funds
you wish to invest in. You choose the amounts and dates for Pioneer to sell
shares of your original fund, and use the proceeds to buy shares of the other
funds you have chosen. Over time, your investment will be shifted out of the
original fund. (Automatic Exchange is available for originating accounts with a
balance of $5,000 or more.)
Directed Dividends
Lets you invest cash dividends from one Pioneer fund to an account in another
Pioneer fund with no sales charge or fee. Simply fill out the applicable
information on a Pioneer Account Options Form. (This program is available for
dividend payments only; capital gains distributions are not eligible at this
time.)
Direct Deposit
Lets you move money into your bank account using electronic funds transfer
(EFT). EFT moves your money faster than you would receive a check, eliminates
unnecessary paper and mail, and avoids lost checks. Simply fill out a Pioneer
Direct Deposit Form, giving your instructions.
Systematic Withdrawal Plan (SWP)
Lets you establish automatic withdrawals from your account at set intervals.
You decide the frequency and the day of the month you want. Pioneer will send
the proceeds by check to the address you designate, or electronically to your
bank account. You can also authorize Pioneer to make the redemptions payable to
someone else. (SWPs are available for accounts with a value of $10,000 or
more.)
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<PAGE>
RETIREMENT PLANS FROM PIONEER
Pioneer has a long history of helping people work toward their retirement
goals, offering plans suited to the individual investor and businesses of all
sizes. For more information on Pioneer retirement plans, contact your
investment professional, or call Pioneer at 1-800-622-0176.
Individual Plans
Individual Retirement Account (IRA)
An IRA is a tax-favored account that allows anyone under age 70-1/2 with earned
income to contribute up to $2,000 annually. Spouses may contribute up to $2,000
annually into a separate IRA, for a total of $4,000 per year for a married
couple. Earnings are tax-deferred, and contributions may be tax-deductible.
Roth IRA
The Roth IRA came about as part of the Taxpayer Relief Act of 1997 and became
available to investors in 1998. Contributions, up to $2,000 a year, are not
tax-deductible, but earnings are tax-free for qualified withdrawals.
401(k) Plan
The traditional 401(k) plan allows employees to make pre-tax contributions
through payroll deduction, up to $10,500 per year or 25% of pay, whichever is
less. Employers may contribute.
SIMPLE (Savings Incentive Match PLan for Employees) IRA Plan
Businesses with 100 or fewer eligible employees can establish a plan; it
resembles a traditional 401(k), but has no administration costs. Employees can
make pre-tax contributions of up to $6,000 per year, and an employer
contribution is required.
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<PAGE>
403(b) Plan
Also known as a Tax-Sheltered Account (TSA), a 403(b) plan is available only to
employees of public schools, not-for-profit hospitals and certain other
tax-exempt organizations. A 403(b) plan lets employees set aside a portion of
their salary, before taxes, through payroll deduction.
Simplified Employee Pension Plan (SEP)
SEPs let self-employed people and small-business owners make tax-deductible
contributions of up to 15% of their income. Generally, employers must
contribute the same percentage of pay for themselves and any eligible
employees; contributions are made directly to employees' IRAs. SEPs are easy to
administer and can be an especially good choice for firms with few or no
employees.
Profit Sharing Plan
Profit sharing plans offer companies considerable flexibility, allowing them to
decide each year whether a contribution will be made and how much, up to 15% of
each participant's pay. These plans can include provisions for loans and
vesting schedules.
Age-Weighted Profit Sharing Plan
Like traditional profit sharing plans, employer contributions are flexible, but
age-weighted plans allocate contributions based on both age and salary.
Age-weighted plans are designed for employers who want to maximize their own
contributions while keeping contributions to employees affordable.
Money Purchase Pension Plan (MPP)
Money purchase plans are similar to profit-sharing plans, but allow for higher
annual contributions - up to 25% of pay. MPPs aren't as flexible as profit
sharing plans; a fixed percentage of pay must be contributed each year,
determined when the plan is established. Businesses often set up both MPPs and
profit sharing plans.
Most retirement plan withdrawals must meet specific conditions to avoid
penalties.
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This page for your notes.
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This page for your notes.
37
<PAGE>
HOW TO CONTACT PIONEER
We are pleased to offer a variety of convenient ways for you to contact us for
assistance or information.
Call us for:
<TABLE>
<S> <C>
Account information, including existing accounts,
new accounts, prospectuses, applications
and service forms 1-800-225-6292
FactFone(SM) for automated fund yields, prices,
account information and transactions 1-800-225-4321
Retirement plans information 1-800-622-0176
Telecommunications Device for the Deaf (TDD) 1-800-225-1997
Write to us:
Pioneering Services Corporation
60 State Street
Boston, Massachusetts 02109
Our toll-free fax 1-800-225-4240
Our Internet e-mail address [email protected]
(for general questions about Pioneer only)
Visit our website: www.pioneerfunds.com
</TABLE>
This report must be preceded or accompanied by a current
Fund prospectus.
[Pioneer Logo]
Pioneer Investment Management, Inc. 9087-00-1100
60 State Street (C) Pioneer Funds Distributor, Inc.
Boston, Massachusetts 02109 [recycle symbol] Printed on Recycled Paper
www.pioneerfunds.com
